Displaced workers, early leavers, and re-employment wages

Abstract:
When receiving information about an imminent plant closure or mass layoffs, workers search for new jobs. This has been the premise of advance notice legislation, but has been difficult to verify using survey data. In this paper, we lay out a search model that takes explicitly into account the information flow prior to a mass layoff. Using universal wage data files that allow us to identify individuals working with healthy and displacing firms both at the time of displacement as well as any other time period, we test the predictions of the model on re-employment wages. Controlling for worker quality and unobservable firm characteristics, workers leaving a "distressed" firm have higher re-employment wages than workers who stay with the distressed firm until displacement.